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The pros and cons of niching

Niching is almost always the right answer, but as Amanda C Watts explains, you have to approach it in the right way.  

2nd Mar 2020
Founder Oompf Global
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I read a recent post in Any Answers about marketing and finding new work with great interest. The firm owner started off in a niche, which worked well and is the preferred direction of the firm. 

However, taking on two sizeable general practice clients - who now account for more than a third of the practice’s income - has tempted them to expand and become more generalist.

The poster was asking for advice on whether to seek out more general practice clients or stick to their original niche market. 

The answers were diverse, ranging from “focus on your niche” to “get as many clients as you can no matter who they are”.  

As a practitioner, you come across many kinds of clients. Some are good and some are bad (I call them vampire clients). Some pay you well and some make you feel like they get far too much bang for their buck.

However, one thing always runs true. You can choose the kind of clients you want to work with. The control is in your hands. 

Let's look at the pros and cons of niching

Cons of a niche practice

  • Risk of dependence on a single market or offering a single service
  • Likely to attract competition if successful (everyone will want what you have got)
  • Vulnerable to market changes – if you have all your eggs in one basket the chosen niche may suffer economic or environmental difficulties (one of my clients services businesses who want to get into China – this is not a very lucrative venture at the moment with the current coronavirus outbreak).

Pros of a niche practice

That being said the Pros outweigh the Cons tenfold. 

  • Less competition – you will be a big fish in a little pond and you can position yourself as the expert. 
  • Speed of success – it takes much less time to gain marketing traction when you have a niche as there is no wastage with your marketing 
  • Speak the language of your clients – each niche has a specific language that, when used by a niche marketer, gets attention and is not overlooked and lost in the white noise. 
  • More lucrative – you can often charge a higher price for work when you are working as a niche practice. You are seen as an expert and people will pay handsomely for your expertise. 
  • Specialist knowledge – as a niche practice you will have a PHD in your clients’ problems and how to overcome them. You will be one step ahead of the client most of the time and this will enable you to be seen as remarkable. 
  • Profit margins are higher because you have systems in place to be more efficient. If you are doing the same kind of work again and again, you can systemise your work. 
  • Your app stack is tight. Working with the same kind of clients means they need the same kinds of apps. This saves you time and money and means you can become highly skilled in using a few great apps vs overwhelmed using all apps available. 
  • Clients are more loyal – because you are the go-to niche expert, Clients will tend to be more loyal as there is less reason to go to your competitor. 

You can see that there are certainly more pros than cons when it comes to niching and there have been some great success examples of niche marketing to attract ideal clients. 

The problem is that the poster’s current niche do not pay as much as their generalist clients (although they are more profitable). So there are two solutions: 

  1. Choose a different niche to target that will invest more in accounting services (but stay niche so that you can systemise and optimise your service)
  2. Get better at marketing to the current niche and scale with client volume rather than income per client. 

Both of these solutions require one thing: the ability to get clients. No matter what stage you are in business - start-up, first few years, established - your job as a firm owner is to get and keep a client. Which is why having a lead generation system is essential. Referral marketing (hope marketing as I call it) just doesn't cut the mustard when it comes to getting your ideal clients flooding through your doors. 

A lead generation campaign needs to be made up of purposeful specific steps and you need to optimise each stage of the campaign to maximise the success of it. 

Step One: Attract ideal clients towards you. To do this you need to know who is an ideal client and where your ideal client is hanging out, so that you can get in front of them. 

Step Two: Once you are visible to a potential new client you must build a relationship with them. 70% of a prospect’s buying decision is made before they even reach out to enquire about working with you. This means you have to create content and share valuable insights to position you as a vital accountant. You can do this on social media, but most importantly you must build a prospect database that belongs to your firm.

Step Three: Convert a prospect into a high paying client. You will need to master a couple of things here to really benefit from potential opportunities. First you need to be clear on your offering and pricing. Secondly you need to know how to sell high value services. Anyone can sell cheap compliance – it’s why you close most of your leads. But selling high value advisory requires more skill and relationship building. 

Once you have a system in place to get high-value clients in a chosen niche that you serve exceptionally well, questions like the one from Any Answers will not be asked by your firm. 

Summary

Having a niche is good for your firm. If you have the opportunity to niche (which you do, it's just a mindset shift) then grab the opportunity and run with it. 

Having a marketing and sales campaign to attract the right clients is a necessity if you want control over the growth of your firm and you want to escape the “hope marketing” trap. 

Replies (27)

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By johnjenkins
03rd Mar 2020 10:16

I never tire of reading how marketing gurus are running the world. When you talk about niches, I inevitably feel that someone is just being lazy. A varied Accountancy practice has to be very healthy and rewarding for the Accountant. I have a colleague who specialises in dentists and really his take on Accountancy is dismal (nice bloke though). Horses for courses.

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Replying to johnjenkins:
Amanda C Watts
By Amanda Watts
03rd Mar 2020 12:43

Hi JohnJenkins. Thank you for your comments and I appreciate all feedback. I work with many firms who have niched and are thriving because they have streamlined thier practice and getting great results for their clients and themselves. My father ran a general practice and spent his life overworked and stressed out with so many different kinds of people wanting his attention and different attention. There is a lot to be said for running a well-oiled machine. Many people get a lot of pleasure from consistency and processes. At the end of the day each firm owner has to do what works for them. There is no right or wrong, just personal preference.

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Replying to Amanda C Watts:
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By johnjenkins
03rd Mar 2020 14:45

If your father was "overworked" and "stressed out" then he wasn't running his practice as a "well oiled machine" was he? (no offence intended just an observation)
Different business that need different attention is what makes an Accountant an Accountant. That is what the job is all about.
The problem in Accountancy is the lack of professionals, which means marketing gimmicks are abound. When making money out of "added value" scenarios come to the fore then we lose sight of what an Accountant is all about.

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Replying to johnjenkins:
Amanda C Watts
By Amanda Watts
03rd Mar 2020 14:57

No you are right, it wasn't a well-oiled machine. Very stressful. So few accountants manage to achieve this scenario.

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Replying to Amanda C Watts:
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By johnjenkins
04th Mar 2020 08:37

There's an old saying used by Clint Eastwood in one of the "Dirty Harry" movies. "A man's (or woman come to that) got to know his (her) limitations". It has served me well.

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By indomitable
03rd Mar 2020 10:40

Yawnnn! Another marketing ‘expert’ regurgitating old marketing principles. Tell us something we don’t already know, which is why I never listen to these people

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Replying to indomitable:
Amanda C Watts
By Amanda Watts
03rd Mar 2020 12:46

I have so much to share that you probably have never heard when it comes to marketing. HOWEVER when I see firms not even embracing the basic marketing techniques in their practice I realise that the foundations are never ever "regurgitated" enough, and the more advanced techniques need to be approached down the line. I would be very open to a conversation to see what marketing you do and give some advice that maybe you haven't heard before, but I would also be quick to say that if the basics work why make it more complicated than it needs to be?

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Replying to Amanda C Watts:
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By indomitable
03rd Mar 2020 13:56

I don't think you could teach me much Amanda and the statement sounds a little arrogant. Not a great way to endear yourself to a prospect. You approached me once before on linkedin and tried to encourage me to attend one of your 'events'. I said to you then, the same thing I say to every growth 'expert' If you are making claims about growth you need to back it up. I am sure you have heard of something called the 'money back guarantee', that is if you believe in your product. At the moment for every £1 spent on marketing I get between £2 to £3 in increased revenue (which is recurring). I would only ever engage organisations such as yours on the basis outlined. Don't get me wrong I know some very good marketing organisations but what worries me is your article is just wrong for many of the reasons outlined by other contributors. The arguments about whether to niche or not have been around for along time and to come out with a definitive conclusion that you need to niche indicates you haven't thought it through properly

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Replying to indomitable:
Amanda C Watts
By Amanda Watts
03rd Mar 2020 14:55

I do have a money-back guarantee, two in fact. And I am not arrogant but in fact very confident in my marketing and sales abilities. I have been a marketer for over 28 years and have studied it daily to hone my craft. I am also very confident when it comes to helping accountants around the world as I too have been doing this for a long time.

I am always open to learning new things so happy to hear if you have some insights that you want to share.

I have worked with niche firms and non-niche firms and the niche firms win new business far easier than the non-niche firms. I wonder what your ROI on marketing would be if you ran a niche practice? That might be an interesting experiment and worth investing a bit of money into to see the traction. Be very open to discussing further as this is a subject I am very passionate about. Feel free to call me on 07782 505045.

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Replying to Amanda C Watts:
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By indomitable
03rd Mar 2020 15:17

I have to say you are nothing if not persistent, and I am glad you do offer a money back guarantee. You have gone up in my estimation.

Whereas you may be right in that it is easier to attract business if you are niche, your practice becomes less resilient. I am sure you know the classic investment phrase 'spread your risk'.

Having said that you can actually be both niche and general. You can have one website and marketing strategy for general and another for a niche area. Best of both worlds. Been toying with this for a while just about time to implement

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Replying to indomitable:
Quack
By Constantly Confused
04th Mar 2020 08:25

indomitable wrote:

I don't think you could teach me much Amanda and the statement sounds a little arrogant.

Ladies and Gentlement, the President of America!

#Hail to the Chief plays#

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Replying to indomitable:
Ben Stanbury, Prosper
By Ben Stanbury
04th Mar 2020 10:16

Here's something you might not already know: Your website still says Copyright 2017 in the footer. My expert advice would be to get that updated.

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By towat
03rd Mar 2020 11:02

A lot of practices that "niched" freelance contractors, including mine, have been hit by IR35 changes, you never know when HMRC are going to move the goalposts.

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Replying to towat:
Amanda C Watts
By Amanda Watts
03rd Mar 2020 12:48

Yes this is something I see sometimes, and agree those who target contractors have been hit. You can have multiple niches within a firm, but also remember if you know how to approach marketing you can always switch a niche knowing that it is possible to get leads. One of the most powerful things for a firm owner is knowing where the next client is coming from. This is why marketing and sales are needed in the 21st century. Relying on referrals is not a predictable way to grow a firm.

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Chris M
By mr. mischief
03rd Mar 2020 11:27

I think niching is pretty dumb in accountancy. I have 4 areas in my practice:

1. Small growing business - more interesting as businesses grow, less rewarding.
2. Leisure - steady work normally and has done well from the 16% fall in the pound due to Brexit.
3. Contractors - I expect to lose 20% of my order book in April. Very glad I have not niched or it would be 90% plus.
4. R&D - can be ridiculously profitable. But there is much greater awareness of this now and so getting new orders in this sector is a lot harder.

Most years, when one of these sectors is a bit down, one of the others will be a bit up. 2020 could be different due to the daft IR35 changes, but it will still be a very profitable year thanks to the other 3 sectors.

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Replying to mr. mischief:
Amanda C Watts
By Amanda Watts
03rd Mar 2020 12:49

You do Niche - you have just listed 4 "areas" (niches) that you work with.

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Replying to mr. mischief:
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By Tickers
04th Mar 2020 20:34

You are already niching, you just don't realise it.

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By Ian McTernan CTA
03rd Mar 2020 11:35

Varied is much better- sure, have a couple specialisations but concentrating on one single niche can bring a lot of trouble. Just ask those contractor accountants who have been slaughtered by the incoming IR35 changes....

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Replying to Ian McTernan CTA:
Amanda C Watts
By Amanda Watts
03rd Mar 2020 12:52

Agree IR35 has hit firms hard. But those I work with who niche are smashing it with new work and onboarding clients. (800K increase in turnover in 16 months as an example). Don't underestimate the power of the RIGHT niche.

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Replying to Amanda C Watts:
By ireallyshouldknowthisbut
03rd Mar 2020 16:49

Out of interest as you seem to take all the credit for your clients "smashing it"* if they lose 90% of their business overnight do you take responsibility for that too?

For the record I have two main niches but I don't dress is up in corporate speak. And yes I am getting smacked up the wrong end by IR35 drop outs. and currently trying to manage the fall out there whilst marketing for new stuff and doing a lot of quotes etc. My quietish period is going full throttle this year.

*I thought I talked badly, and I was dragged up in council estate in darkest Essex

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Replying to ireallyshouldknowthisbut:
Amanda C Watts
By Amanda Watts
03rd Mar 2020 19:47

I was dragged up in deepest darkest Croydon so that could explain the way I sometimes talk... I certainly say it how it is :) When you learn the skill of marketing and sales and know how to run successful marketing campaigns you can pivot when the time is needed. I teach my clients how to fish, I don't give them the fish. That wouldn't serve them well. When you know how to fish you can always bring home dinner.

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Replying to Amanda C Watts:
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By indomitable
03rd Mar 2020 20:15

Amanda stop you really do love cliches and sound bites. Really don’t know what you are railing on about sometimes

“I teach my clients how to fish, I don’t give them the fish” This is not a forum for 12 year olds!

You Post an article that is basically wrong and then you continually try and justify your credentials but you are just digging a bigger hole for yourself

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Replying to indomitable:
Amanda C Watts
By Amanda Watts
03rd Mar 2020 21:45

We are all entitled to our own opinions, however, when someone starts to get personal and a little nasty, I realise that it's probably not a discussion they are after but in fact a fight. I have very thick skin (and confidence) and your comments do not upset me, however, I do hope you don't jump on other people's content and are just as nasty. People take time and effort to create content to help people, if you disagree with it then maybe you should put together a valid view to back up your thoughts rather than pick their view to bits and the way they communicate. Saying it's not a forum for 12 year olds doesn't help your argument. And people who know how to write marketing copy know they should write for 7 year olds, as that is the language that is most understood. I know many accountants (and business owners) who are scared to post online incase they come across someone like you, you literally seem to have nothing better to do than pick on the person who has given up their valuable time to help people through well thought out content. I will not respond any further even if you reply as I will draw a line under this conversation. Thank you for your comments, you have given me some great content for future articles and a great example to share with people on how to ignore haters.

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Replying to Amanda C Watts:
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By indomitable
04th Mar 2020 10:12

Apologies Amanda if my comments came across as personal. This was not my intention at all, I am sorry if this has caused upset. I do however fundamentally disagree with the content of your article and some of your comments. Lets draw a line yes.

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Mona Accountancy Services MAS Mona Accounts Owner Money Mindset Mentor
By Trevenna
04th Mar 2020 12:14

I enjoyed the article. I happen to operate mostly in a niche and because of this I work with a lot of people who I wholeheartedly enjoy working with. Niching in an area that means something to me has meant that I can speak to clients in a way that I know they understand, as I can "talk the language" of that particular field.
I still have clients in other areas too and don't have all my eggs in one basket, but as all of my work comes from word of mouth, my "niche group" is the one that expands the most and I am grateful for it and the type of people that I ultimately get to work with from it.

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By Tickers
04th Mar 2020 20:32

I've been working in practice for over 22 years, as a trainee accountant working for a sole practitioner in a box bedroom room above a newsagent to Big 4 and somewhere in between to eventually setting up my own practice. I'm a qualified accountant and qualified CIOT member so without trying to come off as arrogant I think I can comment on this issue.

In hindsight I regret not trying to find a niche or focusing on a few niche areas much earlier. Throughout most of my career when I worked for other firms, none of which were well managed, invariably they were jacks of all trades and masters of none. Every firm it was a different version of the same thing, chasing our tail for a nickle and dime fee.

This is one of the reasons the practice market is in such a race to the bottom - because too many accountants try to be all things to all people, all of the time. It's just not possible. You cannot hold yourself out to be a general practitioner and simultaneously be trying to win specialist tax or advisory work. How can you do expect clients to take you seriously doing accounts for £30 per month and then expect to get a piece of advisory work or an audit for £000's? Would you go to your GP for on a Monday for a chest infection and then on a Tuesday for cosmetic surgery?

The comments on this thread highlight exactly what is wrong with the profession in that they cry foul that there is a race to the bottom but will take on any client any day of the week regardless of how low the fee is and generally for a lower fee than the previous accountant because they have too many clients on too low a fee instead of staying in your lane and sticking to what your good at.

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Glenn Martin
By Glenn Martin
04th Mar 2020 22:01

Now now lads you have given Amanda a bit of a mauling here on what is a decent article. Whilst the market is full of marketers for accountants (i must get 5 contacts a day from them) having met Amanda and seen several of her presentations she is certainly in the top 2 or 3 people who does what she does.

As a keen angler myself, the fishing comment is quite a good one really in connection to her article. If the you throw bag net out and drag it through the sea you will catch some fish, but they may not be the ones you want so have to throw them back wasting time and money.

If you go fly fishing you are after 1 type of fish, maybe even a single big fish (niche) so get the results you want. So not a bad summary.

With regards creating a niche some guys have created very good niche practices, just look at the Wow Company or MAP in Manchester I would love to achieve what they have.

On the flip side I know of niche firms in the contractor game who are facing ruin.

Whilst a total niche would be great the issues we all face in the early days is the need to earn a living unless you have an investor behind you or a wealthy partner and no matter people say its almost impossible to avoid working too cheaply and for some of the wrong clients. Treat it as a learning curve.

I now have some good pockets of clients within my fee bank which are industry specific but I prefer to work for a type of person as oppose to an industry type. I have 2 client personas I work with, the main is effectively people like me, so similar values, background etc and husband and wife teams. I relate best to them as I face the same issues.

The second persona I go for is an attempt to keep my fee bank fresh and is effectively "me when I was 30" so younger and more dynamic but need a bit more hand holding.

Since highlighting on these 2 client types I have hit a rich vein of client referrals, as they all mix in similar social circles its good for cross referrals.

Not sure if this is a niche or not but its working for me now, after I have found my own line of best fit through to the right clients, its only took me 5 years to work it out.

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